Evening Report: April 21, 2022

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FBI warns about cyber attacks in agriculture... The FBI sent out a bulletin warning that ransomware attacks on agricultural cooperatives are more likely during critical planting and harvest seasons, disrupting operations, causing financial loss, and negatively impacting the food supply chain. It was noted there were already two attacks in early 2022 and six in the fall of 2021 targeting grain cooperatives. Cyber attackers may perceive cooperatives as lucrative targets with a willingness to pay due to the time-sensitive role in agricultural production. The goal could be to disrupt seed and fertilizer supplies.

U.S., Britain, Australia, Canada and New Zealand cybersecurity agencies issued a warning of increased cybercrime risk due to Russia’s invasion of Ukraine. They added cybercrime groups pledged to support the Russian government in carrying out digital extortion attacks against Western targets. Last week, the U.S. reported advanced hackers have shown they can take control of an array of devices that help run power stations and manufacturing plants. In March, the U.S. government stated “evolving intelligence” that Russia was exploring options for potential cyberattacks.
 


Winter wheat drought area increases... The amount of U.S. winter wheat considered in drought conditions increased one point to 70% for the week ended April 19, according to the U.S. Drought Monitor. USDA rated winter wheat drought as 16% “moderate,” 30% “severe,” 21% “extreme” and 2% “exceptional." Last week, USDA said winter wheat drought was 17% “moderate,” 31% “severe,” 18% “extreme” and 2% “exceptional.”

For HRW areas, the area considered abnormally dry/drought in Kansas increased three points to 74%. Oklahoma dropped four points to 81%. Texas’s abnormally dry/drought area decreased by one point to 96%. South Dakota had 87% of its land classified as abnormally dry/drought, a three-point increase. Nebraska (99%), Montana (90%) and Colorado (100%) had the same amount of land considered abnormally dry/drought.

In SRW areas, Arkansas has a six-point drop to 21% of its area considered abnormally dry/drought. Illinois had 10% of its land classified as abnormally dry/drought, a one-point drop. Michigan had 6% of its area considered abnormally dry/drought, a one-point decline. North Carolina had 44% of its area classified as abnormally dry/drought, a one-point decrease. Missouri (0%), Ohio (0%) and Indiana (0%) had the same percentage of the area considered abnormally dry/drought as the previous week.

 


Spring planted crops drought area decreases... Spring wheat had a six-point decline in the amount of the crop in drought to 40%. North Dakota had 14% of its spring wheat area in drought, down 11 points from the previous week. South Dakota increased the amount of its spring wheat in drought by two points to 58%.

The amount of cotton in drought declined by five points to 55%. Georgia had a three-point drop in the amount of its cotton in drought. Mississippi had a 42-point reduction in the amount of cotton in drought. Arkansas had the amount of cotton considered in drought drop by six points. Texas stayed at 97% of its cotton area in drought conditions.

USDA said 19% of the soybean crop is in drought, down two points from the previous week. The percent of U.S. corn considered in drought dropped by one point to 29%, due to a two-point drop in Iowa. 

 

NWS: Hot, dry in HRW areas, western Corn Belt through July... The National Weather Service 90-day forecast continues to give elevated odds of above-normal temps and below-normal precip across HRW wheat production areas through July. The highest probability of hot, dry conditions is centered over Colorado, the panhandles of Texas and Oklahoma and western Kansas.

Above-normal temps and below-normal precip are also expected across much of the western Corn Belt, including Nebraska, South Dakota, most of Iowa, southern Minnesota and northwestern Missouri. Much of the eastern Corn Belt is expected to see above-normal precip and “equal chances” for normal, above- and below-normal temps during the period.

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Rural Mainstreet Index drops but remains above growth-neutral... The Creighton University Rural Mainstreet Index (RMI) overall reading for April declined to 62.0 from March’s 65.0. Any reading over 50.0 is above growth-neutral. The region’s farmland price index for April climbed to 80.0 from 78.0 in March, marking the 19th straight month the index has been above growth-neutral. April’s farm equipment-sales index declined to 67.6 from 72.2 in March, though that was the 17th consecutive month the index remained above growth-neutral. More than 91.7% of bankers in the survey expect the Federal Reserve to raise short-term interest rates by 50-basis points at its next meeting on May 3-4. Only 39.1% of bankers expect the E15 emergency summer waiver to have a positive impact. 

 

Global total grain estimate raised on increased Brazil corn production... The International Grains Council (IGC) raised its 2021-22 total grain production (wheat and coarse grains) by 3 MMT from last month, primarily due to an increase in Brazil’s corn production forecast. Corn carryout stocks were cut by 1 MMT for 2021-22. The group reduced 2021-22 world soybean production by 1 MMT, cut consumption by 2 MMT and increased carryout stocks by 2 MMT from its March report. Wheat trade for 2021-22 was cut by 1 MMT and carryout stocks were increased by that amount. Wheat production and consumption were unchanged from the March report.


 

2022-23 global grain production, carryout stocks cut... In its first estimate for 2022-23, IGC noted the projections “are especially tentative given the conflict in the Black Sea region.” For total grains, IGC cut production by 12 MMT, trade by 9 MMT and carryout stocks by 26 MMT from its 2021-22 estimate. It increased total grain consumption to 2.302 billion MT (BMT). For corn, production was cut 13 MMT to 1.197 BMT, trade was lowered by 4 MMT to 171 MMT and carryout stocks were reduced by 21 MMT to 265 MMT.

Global wheat production in 2022-23 was estimated at 780 MMT, down 1 MMT from 2021-22, and consumption was increased to 785 MMT, up 7 MMT. Total 2022-23 wheat ending stocks were projected to be 277 MMT, down 5 MMT from 2021-22.

For soybeans, 2022-23 total production was increased 5 MMT to 520 MMT, trade was cut 1 MMT to 50 MMT, consumption was raised 3 MMT to 517 MMT and ending stocks were increased 3 MMT to 184 MMT. 
 

 

SovEcon raises Russia’s wheat production, export forecasts... Black Sea region consulting firm SovEcon increased its 2022 Russian wheat production estimate to a record 87.4 MMT on excellent crop conditions and good inputs availability. The firm expects the pre-harvest winter wheat area to hit a record 17.0 million hectares. Crops in key growing regions look good and there was below-average winter kill.

The firm increased its 2022-23 Russian wheat export forecast to 41.0 MMT from 33.9 MMT this year, assuming no western sanctions on food exports or escalation of the Russian war. While the Russian government will likely set export quotas for the second half of 2022-23, SovEcon expects them to be close to export potential.

 

Argentina expected to cut wheat plantings in 2022-23... Argentine farmers are expected to plant 6.5 million hectares to wheat in 2022-23, according to the Buenos Aires Cereal Exchange. That would be a 200,000-hectare cut from what they planted in 2021-22. For 2021-22, the country produced 21.8 MMT of wheat. The exchange noted high fertilizer prices, rising input costs, a relative improvement in barley margins and domestic policies as reasons for the reduced planted area.

 

Ag economists: Cash Cattle Mandate bill solves a problem that does not exist... A group of agricultural economists noted the revised Cash Cattle Mandate bill is attempting to solve a problem that does not exist. “There is no research evidence of any significant or persistent fed cattle price discovery problem at this time,” they said.

The agricultural economists note the legislation offers zero benefits for fed cattle markets and imposes many millions of dollars of additional cost, added risk and lost value. The cost of the implementation will depend on the details. But they expect it will cost at least hundreds of millions of dollars resulting in lower feeder cattle prices and higher consumer beef prices. The revised legislation was assessed ahead of a hearing on April 26 on the topic by the Senate Ag Committee.

 

Powell blesses a 50-basis point interest rate increase... Federal Reserve Chair Jerome Powell blessed a half-point interest-rate hike next month and signaled support for further aggressive monetary tightening to curb inflation by noting that he saw merit in “front-end loading” policy moves. He said the Federal Reserve is committed to getting inflation back to 2%.

Interest-rate futures are fully pricing in a 50-basis point increase in the benchmark lending rate when U.S. central bankers meet May 3-4 and another 50-basis point hike is fully priced for June. Investors are betting on a third 50-basis point increase for July. St. Louis Fed president James Bullard has opened a debate about doing a more aggressive 75-basis-point increase if needed.

 

Oil refiners plan to increase summer diesel and jet fuel production... In response to market prices, oil refiners are planning to increase jet fuel and diesel production instead of gasoline this summer. Typically, refiners increase gas production as the driving season increases gasoline demand. Over the past ten years, the average profit at this time of year for distillates and gasoline was $26.24 and $27.48 a barrel, respectively. The current distillates profit margin is $60 and gas is $34. Demand for distillates has increased as the world has a diesel shortage and air travel demand increases.

 

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